Social media Confundere

A month or so back I decided to quit every Whatsapp group I was member of. The decision to quit had nothing to do with the members of those groups, many of whom I continue to interact on WA / Twitter  even after the move. While Social groups such as those on WA and Slack provide ability to interact with a lot of folks who are more blessed than us in terms of understanding of market structure, to me, it added more noise than I could bear.

Most groups have a wide variety of participants – from total novices who are there to pick up ideas / thoughts to experts who trade full time and given the randominity, its fairly common to see some one or the other make the right call all the time.

Its only in this business that I have found that most folks are winners, they are either holding a winning stock or had known / identified a stock that is now in the limelight. While data says that 95% of traders lose and a large percentage of investors under perform the market averages, on Social Media, everyone is a winner.

As a system trader trading a trend following system, its normal for me to find myself on the losing side 60% of the time. While in theory its just another number, in reality its a way of life that is tough to practise.

Social Media is a sort of a echo chamber – you generally start finding guys who think in ways similar to you regardless of whether they actually believe it or not. As Brexit and Trump votes have shown, too many claimed to be on the right side just because they were too embarrassed to talk about supporting the Exit / Trump out it in the open.

While momentum is the easy way to trade in markets, its mean reversion that attracts more followers. For instance today I am sure many a group are discussing how markets are showing resistance (if you search enough, you shall find charts suited to showcase the same). Now, if tomorrow market falls, you should see the same getting referenced while on the other hand if market somehow manages to move higher, there is always another chart / resistance that would the next point to watch out for.

But if you are Long or Short, the noise has a impact in terms of you starting to second guess your decisions as also wondering if you are the only loser in town. Rather than being educative, most groups end up emphasizing on herd mentality (unknowingly) since you find yourself nodding in agreement with the rationale than try and find the points where you can disagree.

If you are a investor / trader and believe that you really cannot ignore the noise and focus only on the Signal, I would urge you to seriously check out whether you are really getting value for the time you spend (and I hear of many Premium groups where there is a charge to enter). I personally have found that individual discussions has more value than groups where there is a constant chatter with no one being wiser about who really does what.